INTERNATIONAL. Britain controlled about one-fourth of the Earth's land surface and one-fifth of the world's population in 1939. Fifty years later, its holdings outside the British Isles had become trivial, and it even faced an insurgency in Northern Ireland.

Britain spent the intervening years developing strategies to cope with what poet Rudyard Kipling called its "recessional," or the transient nature of Britain's imperial power. It has spent the last 20 years defining its place not in the world in general but between continental Europe and the United States in particular.

The Rise of Britain

Britain's rise to its once-extraordinary power represented an unintended gift from Napoleon. It had global ambitions before the Napoleonic Wars, but its defeat in North America and competition with other European navies meant Britain was by no means assured pre-eminence.

In Napoleon's first phase, France eliminated navies that could have challenged the British navy. The defeat of the French fleet at Trafalgar and the ultimate French defeat at Waterloo then eliminated France as a significant naval challenger to Britain for several generations.

This gave Britain dominance in the North Atlantic, the key to global power in the 19th century that gave control over trade routes into the Indian and Pacific oceans.

This opportunity aligned with economic imperatives. Not only was Britain the dominant political and military power, it also was emerging as the leader in the Industrial Revolution then occurring in Europe. Napoleon's devastation of continental Europe, the collapse of French power and the underdevelopment of the United States gave Britain an advantage and an opportunity.

As a manufacturer, it needed raw materials available only abroad, markets to absorb British production and trade routes supported by strategically located supply stations. The British Empire was foremost a trading bloc. Britain resisted encroachment by integrating potential adversaries into trade relationships with the empire that it viewed as beneficial. In addition, the colonies, which saw the benefits of increased trade, would reinforce the defense of the empire.

As empires go, Britain resembled Rome rather than Nazi Germany. Though Rome imposed its will, key groups in colonial processions benefitted greatly from the relationship. Rome was thus as much an alliance as it was an empire. Nazi Germany, by contrast, had a purely exploitative relationship with subject countries as a result of war and ideology.

Britain understood that its empire could be secured only through Roman-style alliances. Britain also benefitted from the Napoleonic Wars' having crippled most European powers. Britain was not under military pressure for most of the century, and was not forced into a singularly exploitative relationship with its empire to support its wars. It thus avoided Hitler's trap.

The German and U.S. Challenges

This began to change in the late 19th century with two major shifts. The first was German unification in 1871, an event that transformed the dynamics of Europe and the world. Once unified, Germany became the most dynamic economy in Europe. Britain had not had to compete for economic primacy since Waterloo, but Germany pressed Britain heavily, underselling British goods with its more efficient production.

The second challenge came from the United States, which also was industrializing at a dramatic pace -- a process ironically underwritten by investors from Britain seeking higher returns than they could get at home. The U.S. industrial base created a navy that surpassed the British navy in size early in the 20th century. The window of opportunity that had opened with the defeat of Napoleon was closing as Germany and the United States pressed Britain, even if in an uncoordinated fashion.

The German challenge culminated in World War I, a catastrophe for Britain and for the rest of Europe. Apart from decimating a generation of men, the cost of the war undermined Britain's economic base, subtly shifting London's relationship with its empire.

Moreover, British power no longer seemed inevitable, raising the question among those who had not benefitted from British imperialism as to whether the empire could be broken. Britain became more dependent on its empire, somewhat shifting the mutuality of relations. And the cost of policing the empire became prohibitive relative to the benefits. Additionally, the United States was emerging as a potential alternative partner for the components of the empire -- and the German question was not closed.

World War II, the second round of the German war, broke Britain's power. Britain lost the war not to Germany but to the United States. It might have been a benign defeat in the sense that the United States, pursuing its own interests, saved Britain from being forced into an accommodation with Germany.

Nevertheless, the balance of power between the United States and Britain completely shifted during the war. Britain emerged from the war vastly weaker economically and militarily than the United States. Though it retained its empire, its ability to hold it depended on the United States. Britain no longer could hold it unilaterally.

British strategy at the end of the war was to remain aligned with the United States and try to find a foundation for the United States to underwrite the retention of the empire. But the United States had no interest in this. It saw its primary strategic interest as blocking the Soviet Union in what became known as the Cold War. Washington saw the empire as undermining this effort, both fueling anti-Western sentiment and perpetuating an economic bloc that had ceased to be self-sustaining.

From Suez to Special Relationship

The U.S. political intervention against the British, French and Israeli attack on Egypt in 1956, which was designed to maintain British control of the Suez Canal, marked the empire's breaking point. Thereafter, the British retreated strategically and psychologically from the empire. They tried to maintain some semblance of enhanced ties with their former colonies through the Commonwealth, but essentially they withdrew to the British Isles.

As it did during World War II, Britain recognized U.S. economic and military primacy, and it recognized it no longer could retain its empire. As an alternative, the British aligned themselves with the U.S.-dominated alliance system and the postwar financial arrangements lumped together under the Bretton Woods system.

The British, however, added a dimension to this. Unable to match the United States militarily, they outstripped other American allies both in the quantity of their military resources and in their willingness to use them at the behest of the Americans.

We might call this the "lieutenant strategy." Britain could not be America's equal. However, it could in effect be America's lieutenant, wielding a military force that outstripped in number -- and technical sophistication -- the forces deployed by other European countries. The British maintained a "full-spectrum" military force, smaller than the U.S. military but more capable across the board than militaries of other U.S. allies.

The goal was to accept a subordinate position without being simply another U.S. ally. The British used that relationship to extract special concessions and considerations other allies did not receive. They also were able to influence U.S. policy in ways others couldn't.

The United States was not motivated to go along merely out of sentiment based on shared history, although that played a part. Rather, like all great powers, the United States wanted to engage in coalition warfare and near warfare along with burden sharing. Britain was prepared to play this role more effectively than other countries, thereby maintaining a global influence based on its ability to prompt the use of U.S. forces in its interest.

Much of this was covert, such as U.S. intelligence and security aid for Britain during the Troubles in Northern Ireland. Other efforts were aimed at developing economic relationships and partnerships that might have been questionable with other countries but that were logical with Britain.

A good example -- though not a very important one -- was London's ability to recruit U.S. support in Britain's war against Argentina in the Falkland Islands, also known as the Malvinas. The United States had no interests at stake, but given that Britain did have an interest, the U.S. default setting was to support the British.

There were two dangers for the British in this relationship. The first was the cost of maintaining the force relative to the benefits. In extremis, the potential benefits were great. In normal times, the case easily could be made that the cost outstripped the benefit. The second was the danger of being drawn so deeply into the U.S. orbit that Britain would lose its own freedom of action, effectively becoming, as some warned, the 51st state.

Britain modified its strategy from maintaining the balance of power on the Continent to maintaining a balance between the United States and Europe. This allowed it to follow its U.S. strategy while maintaining leverage in that relationship beyond a wholesale willingness to support U.S. policies and wars.

Britain has developed a strategy of being enmeshed in Europe without France's enthusiasm, at the same time positioning itself as the single most important ally of the only global power. There are costs on both sides of this, but Britain has been able to retain its options while limiting its dependency on either side.

As Europe increased its unity, Britain participated in Europe, but with serious limits. It exercised its autonomy and did not join the eurozone. While the United States remains Britain's largest customer for exports if Europe is viewed as individual countries, Europe as a whole is a bigger customer.

Where others in Europe, particularly the Germans and French, opposed the Iraq war, Britain participated in it. At the same time, when the French wanted to intervene in Libya and the Americans were extremely reluctant, the British joined with the French and helped draw in the Americans.

Keeping its Options Open

Britain has positioned itself superbly for a strategy of waiting, watching and retaining options regardless of what happens. If the European Union fails and the European nation-states re-emerge as primary institutions, Britain will be in a position to exploit the fragmentation of Europe to its own economic and political advantage and have the United States available to support its strategy.

If the United States stumbles and Europe emerges more prominent, Britain can modulate its relationship with Europe at will and serve as the Europeans' interface with a weakened United States. If both Europe and the United States weaken, Britain is in a position to chart whatever independent course it must.

The adjustment British Prime Minister Winston Churchill made in 1943 when it became evident that the United States was going to be much more powerful than Britain remains in place. Britain's willingness to undertake military burdens created by the United States over the last 10 years allows one to see this strategy in action. Whatever the British thought of Iraq, a strategy of remaining the most reliable ally of the United States dictated participation.

At the same time, the British participated deeply in the European Union while hedging their bets. Britain continues to be maintaining its balance, this time not within Europe, but, to the extent possible, between Europe and the United States.

The British strategy represents a classic case of a nation accepting reversal, retaining autonomy, and accommodating itself to its environment while manipulating it. All the while Britain waits, holding its options open, waiting to see how the game plays out and positioning itself to take maximum advantage of its shifts in the environment.

It is a dangerous course, as Britain could lose its balance. But there are no safe courses for Britain, as it learned centuries ago. Instead, the British buy time and wait for the next change in history.

Disclaimer: This article is sourced from a third party news provider as an additional service to our readers. The views expressed in this article are not necessarily shared by Business Intelligence Middle East.

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UAE. Senior figures from the financial services industry will share valuable industry insight and practical knowledge, on key topics including AML national risk assessment, Regtech and Fintech, art and financial crime and the future of Fintech.

UAE. Senior figures from the financial services industry will share valuable industry insight and practical knowledge, on key topics including AML national risk assessment, Regtech and Fintech, art and financial crime and the future of Fintech.